Annotation
In modern conditions of development of a market management mechanism in Azerbaijan, the importance of a stable and efficient banking system is significantly increasing, it turns into one of the most important components of the successful functioning of the entire economy of the state. In order to adapt it to the modern needs of highly capitalized financial institutions and subsequent compliance with the international standard, the financial sector of Azerbaijan has been reformed. However, the development of the global economy dictates new trends for nation states. In the general economic system, the banking sector of Azerbaijan continues to search for innovations in order to further improve its activities.
Keywords: global and national economies, the dominant of the Azerbaijani economy, banking system, needs, reform system requirements, stabilization.
In the modern period of accelerated development of the global economy, there is a transition of national economies from a group of countries with a «developing economy» to a group of countries with a «developed economy». The ability of an individual country to create and maintain a strong economy means to be an accomplice in global business as a partner and a full-fledged competitor. Therefore, the research topic of this article is relevant and promising. It should be noted that in the framework of theoretical models, foreign economists - A. Smith, W. Petty, J.M. Keynes, A. Marshall, A. Pigou, D. Galbraith, G. Mankyu and others, investigated the sources of growth of national economies. All of them came to the conclusion that the effective development of national economies depends on many factors: scientific and technological progress; investment investments; qualifications of employees, institutional framework, transparent activities, etc. However, for more effective economic shifts, it is necessary that these and other factors are in harmonized relations and can interact in a common structure, not only in conditions of stability, but also in crisis conditions of global transformations. To this end, in countries with a progressing economy, the working mechanism is undergoing reform in all areas, including the banking sector. The successful work of the banking sector largely determines the effectiveness of the functioning and growth of the state economy.
In Azerbaijan, the state of the national banking system is the dominant development of the financial market. In the context of the transition to a stable financial system, of particular importance in the Republic is the assessment of the complex of conditions and factors of stability of national banks, ensuring the needs of the national economy in banking services. [5; 214]
The level of stability of the banking system is interconnected and interdependent on the economic stability of the state. However, the development process of Azerbaijani banks, which together constitute the basic structure of the national banking system, has its own specifics, due to the socio-economic environment and the needs of the economy for banking services. The banking sector of Azerbaijan is simultaneously influenced by a complex of factors: institutional framework, two-level structure, inter-level relations and regulatory functions. [2; 512]
In the complex of fundamental factors for the development of the banking sector of the Azerbaijani economy, first of all, sustainability as its basic factor, the following provision should be highlighted: such a system is recognized as stable, in which the totality of changes in individual economic parameters ultimately brings the entire system into equilibrium. This approach gives reason to consider the stability of Azerbaijani banks from the position of system requirements, as well as the variety of relations of their development in connection with organizational and functional changes occurring under the influence of external circumstances and the socio-economic environment as a whole. Academician Ramiz Mehdiyev, in his work “Social and Human Sciences: A Look in the Context of the Time,” writes: “Since the banking sector is one of the segments of the financial market and its development interacts with other segments, balanced development and interaction of each of the segments form the basis for the sustainability of each them. A change in the nature of the relationship in a given period of development of the financial market as a whole (for example, accelerating the development of one of them to the detriment of the others) leads to a disruption in the balance and stability of relations and interests of various market participants. ” [4; 156]
It should be noted that the development of the international banking sector of Azerbaijan, the formation of its new paradigm in the context of financial globalization and the intensification of world economic relations in recent years (as in other countries) requires constant innovation. The close interweaving of innovations, the financial and foreign economic environment is one of the most important factors characterizing the phenomenon of the “new economy”. Therefore, innovative processes should be considered in conjunction with changes in the processes associated with foreign economic banking. A wide range of innovative trends in the international banking sector is determined by both the internal competitive environment and external vectors. [6; 67-81]
In 2018, the banking sector of Azerbaijan demonstrated successful work, due to which its activity was stabilized. For the first time since 2015, credit institutions in the country were able to increase lending. As of December 1, 2018, this indicator amounted to 12.56 billion manat, having increased by 806.4 million manat, or 6.86% since the beginning of the year. As before, in 2018, “ritail” loans prevailed in lending (in recent years their share has been gradually increasing). If in 2016 the indicator of consumer credit was 35%, in 2017 - 39%, then in 2018 its specific gravity reached 42.2%, thus, it was as close as possible to the pre-devaluation indicator of the beginning of 2015. [3]
The first private credit bureau and a register of movable property were established in the Republic of Azerbaijan; and also, the discount (interest) rate was reduced and the first blockchain project (block chain) was prepared. In order to ensure sustainable economic development, focusing on the internal strategy, flexible, adequate steps have been taken in Azerbaijan.
Thus, as a result of the implementation of comprehensive reforms, macroeconomic stability has strengthened, the business and investment environment has improved, the diversification of the economy has accelerated, the development of regions and entrepreneurship has deepened, and non-oil exports have grown. According to a report published on the World Bank’s Doing Business website 2019, Azerbaijan entered the top ten reformer countries. If in 2017 he took 57th place, then in 2018 he climbed 32 steps and took 25th place among 190 countries. Azerbaijan has become one of 10 countries that have improved their performance on the indicators of the report. The forecast of Standard & Poor'sS & P international rating agency on economic development prospects was made in unison with the Davos forum: Azerbaijan’s GDP growth will average 3.3% over the next four years, and nominal GDP will increase from AZN 70 billion by 2021 (41 billion dollars) up to 99 billion manats (52 billion dollars). Per capita GDP in 2018 amounted to 4.6 thousand dollars, and in 2019 it will be 4.8 thousand dollars, in 2020 - 5.0 thousand dollars, and in 2021 - 5, 1 thousand dollars. The International Rating Agency (MRA) affirmed the country's long-term and short-term sovereign credit rating in foreign and local currencies at 'BB + / B', and the rating outlook changed from negative to stable. “Azerbaijan’s sovereign credit rating remained unchanged due to the country's strong fiscal position, and, in particular, the presence of foreign currency reserves of the State Oil Fund (SOFAZ)” (SOFAZ assets increased by 4.96% in the first half of 2017 compared to since the beginning of 2017 (33.147 billion dollars) and amounted to 34.79 billion dollars [9]
In 2018, inflation in Azerbaijan was at the level of 8%, according to the forecasts by the MPA in the next three years, it will be at the level of 5% per year. And, by 2021, up to 5.0%. MRA Standard S&P also predicts the execution of the Azerbaijani state budget with a surplus, i.e. For the first time since 2014, the state’s budget position will return to a surplus of 1.5% of GDP, in 2019 - 0.6%, in 2020 - 1.1%, and in 2021 - 1.7% of GDP . The gradual improvement of the state budget indicators is explained by the recovery of economic growth rates and relatively high oil prices. That is, according to S&P estimates, in the next few years, the Azerbaijani economy will develop, gaining billions in revenue every year. By the way, these are the forecasts of the IMF, as well as many other international financial institutions. [8]
At the beginning of December 2016, the Strategic Roadmap of the National Economy and Main Sectors of the Economy were approved. In order to quickly adapt to the processes taking place in the global economy and financial markets, and to support the post-oil economic development model, taking into account the new calls and opportunities facing the financial sector, a “Strategic Road Map for the Development of Financial Services in the Republic of Azerbaijan” has been developed. This document was developed on the basis of the principles of innovation, flexibility, competitiveness and economic development of the financial services sector. The Strategic Road Map, as a whole, is designed for the near, medium and long-term periods of development. In accordance with the periods, the map contains action plans: until 2020, 2025 and for the long term, i.e., after 2025.
Due to the implementation of priorities in the financial services sector, an increase in real GDP is forecasted to reach up to 750 million manats in 2020, as well as 1,600 additional jobs in the financial services sector. By 2025, a new level of effective functioning of the stock and bond market is expected in Azerbaijan. By this time, the banking sector of the Republic will be fully adapted to the requirements of the Basel III standard.
Improving credit risk assessment mechanisms, the corporate governance structure and risk management processes, taking into account the requirements of international standards, will increase the ability to manage risks in financial institutions. To achieve the set goals for 2025 and the subsequent period, young, highly qualified specialists with the necessary knowledge and skills will be trained in Azerbaijan universities, private training centers, regulatory agencies, and investments in the amount of AZN 115 million will be released. Funding for the implementation of measures provided for in the Strategic Roadmap will be funded from the state budget, the Central Bank, extra-budgetary funds, the National Entrepreneurship Support Fund and other credit and investment organizations, as well as from local budgets, local institutions, enterprises and organizations, regardless of ownership, foreign direct investment, securities market, loans of the country's banking system, loans of international organizations and foreign strange states, grants, technical assistance and from other sources not prohibited by legislation. [1]
Thus, the urgent task of the modern period is the formation of the basic principles of the strategy of Azerbaijan regarding the effective and safe integration of the domestic economy into the global financial space. This strategy should concentrate on solving internal tasks for Azerbaijan to enhance the attraction of foreign capital, meet the state’s foreign policy and economic goals, and ensure the country's national financial security. Based on these guidelines, the main directions were identified for ensuring the effective and stable development of the domestic banking system, in particular: increasing the level of capitalization of the banking system, ensuring its liquidity and improving the system of banking regulation and supervision. Increasing the capitalization of the banking system implies an increase in the volume of capital in the banking system to better meet the needs of the economy and ensure its stability in cases of crisis. Increasing the level of capitalization of domestic banks will increase their competitiveness in the global financial market and ensure financial stability of the entire economy of Azerbaijan on the way to its integration into the world economy. An effective management system should constantly ensure a sufficient level of liquidity at minimal cost, therefore methods of liquidity management, methods for assessing the need for liquid funds and the availability of sources of replenishment for each bank are important. The choice of acceptable approaches to liquidity management remains the prerogative of the bank's management and depends on a number of internal and external factors. Today, it is advisable for bank institution managers to adhere to certain principles. Understanding the essence of liquidity problems, they should search for optimal management methods, organize adequate control systems and assess needs for liquid assets, provide affordable sources for replenishing them. [8]
As we see, the main prerequisites for the effective functioning of the banking system of Azerbaijan today are strengthening and improving the resource base, maintaining a balanced growth rate of the loan portfolio with the rate of change in capitalization, providing economic conditions to increase the share of long-term investment lending in bank assets, reducing the vulnerability of the banking system to external and internal factors of destabilization, ensuring its reliability, and therefore, increasing its role in the processes of economic transformation. The above factors directly affect the competitiveness of the national banking system. Therefore, they should be taken into account in the development and implementation of domestic monetary and financial policies of Azerbaijan in order to strengthen its competitive position in the global economic space.
Bibliography
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